You are a new business trying to get a grip on everything, from inventories to dealers, debtors to banks, purchases to sales, and you think that bookkeeping can wait. Time flies by, and soon it has been a year. You need to see how much you have earned, and that’s when you realize that there is no data available because you skipped on the most important task – bookkeeping.
This is just one example of what happens when you avoid bookkeeping. There are several other consequences.
7 Consequences of Avoiding Bookkeeping
Be it a conglomerate or a small business, bookkeeping is essential. However, if you avoid bookkeeping or don’t hire a professional bookkeeping service, you might face the following consequences.
No Books, No Finance
If you approach a bank or other financial institution without any financial records, you won’t be able to raise money. Every bank or financial institution needs to look at your books and ascertain if you are capable enough to pay off the loan. In the absence of such records, raising capital is difficult.
Try being in their shoes and ask yourself, would you give money to a stranger without knowing whether they can pay you back or not? Of course not. Thus, keeping your books updated is important if you plan to secure a loan.
No Reliable Decisions
In a business, you transact hundred times daily, pay numerous bills, and settle several accounts in a day. Is it possible to remember everything? No. You need to record these transactions. If not, how would you quantify what percentage of your money you are paying for a certain expense? Do you have enough liquid assets to discharge that liability, or can you afford an extra employee? You can only make an informed decision when you have a clear picture of your accounts, and in the absence of books, a reliable decision is a far cry. Every decision you make should be based on facts. To make reliable decisions, bookkeeping is recommended.
No Control
The strict control of money is what makes a business successful. Small errors can become the worst nightmares if not stopped on time. You must know where the money is coming from and where it is going. If money is going out of business, be it for settling a creditor’s account, for an expense, or coming from any debtor, or a sales return, it should be duly recorded.
Without a proper record, you can’t claim your money from debtors. In addition, any fraudulent activities or misappropriation of assets by employees becomes hard to trace. Also, you can’t determine what expenses are costing you the most and how you can control them.
To regain control of your business’s hard-earned money, you must hire small bookkeeping services.
Payroll Problems
It is a bad idea if you plan on undertaking bookkeeping yourself. Because recording expenses and incomes may be simple, payroll and taxes aren’t everyone’s cup of tea. You are bound to make errors. Payroll involves classifying employees based on their roles, tracking their leaves, determining their benefits, and recording everything.
Your employees are your most significant assets and must be paid on time. Payroll also involves paying and collecting taxes on time. This function is tedious. Avoiding bookkeeping increases the risk of overpaying, underpaying, untimely payments, non-payment of taxes, etc. Apart from disgruntled employees, you also risk breaking the law, which can result in fines and penalties. So, avoiding bookkeeping should be the last on your list as a business.
No Books, No Tax Preparation
Being a business, filing your tax returns is mandatory. But without records, no accountant can help you. To do your taxes, the accountants rely on books. Then, based on your numbers, a financial statement is prepared, and taxes are calculated.
Without books, it is impossible. You will have a hard time finding an accountant who will help you. Or you will have to incur extra costs to get your books prepared. Financial statements prepared at the end of the year have a risk of not being accurate and fair. It also increases the risk of errors. You might face fines and penalties if you file an incorrect tax return. To avoid them, hire a small business bookkeeping service in Mesa.
Lack Of Vision
To drive your company successfully into the future, you need a strategy. A strategy is based on both financial and non-financial factors. Without proper books of accounts, you can’t predict where you want to go and which targets you wish to achieve. On the other hand, a sound financial strategy is based on numbers, and the lack of it only signifies a lack of vision which is crucial for any organization’s success.
It Affects Work Culture
Not having a proper bookkeeping system in place indicates poor administration. It is an essential part that must be employed as soon as the business goes live. It also affects payroll, it affects other bill payments, and it also affects your cash flow. In short, it leaves a bad impression on your staff, and the work culture suffers. Your employees feel demotivated and look for better opportunities. So, think a hundred times about the consequences before you avoid bookkeeping.
Conclusion
Managing a business is no joke, and you shouldn’t take it lightly. Hiring a small business bookkeeping service is important to run your business successfully so that you can keep a tab on your income and expenses. The consequences discussed above must have given you ample reasons why you should not avoid bookkeeping.
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